Millennials Are More Likely to Use This Illegal Trick to Save Money Than Any Other Generation
A survey conducted by United Way Worldwide found that 74% of millennials are stressed about filing their tax returns. No real shocker there, though. Almost everyone feels anxious about tax season. How to file your taxes is as confusing as ever, thanks to widespread tax reform changes in effect this year.
In fact, millennials are so stressed, they can’t figure out which tax bracket they’re in. NerdWallet’s Tax Study found 16% of millennials don’t even know what a tax bracket is. But they do know how to skirt the system. To be fair, NerdWallet’s Tax Study proves that all Americans confess to employing a few illegal tax strategies to save money, but millennials do it most. Are they tricking the system on purpose? Maybe, maybe not. So how do they do it? Here are the seven illegal tax strategies millennials use more than any other generation ranked by popularity.
7. Claiming non-qualified deductions
Qualified money includes retirement plans like 401(k)s and traditional IRAs. There are no tax deductions for non-qualified plans like money markets or annuities. Nevertheless, 3% of millennials admit to claiming these deductions on their tax returns to save a buck. Just 1% of baby boomers and Gen X-ers do the same, but all are at risk of penalty should the IRS catch wind of this illegal tax strategy.
Next: A common fib for business owners
6. Exaggerating deductible business expenses
Millennials are the small business generation. So it’s no surprise that more entrepreneurial young people admit to inflating deductible business expenses on their tax return than any other generation.
The IRS warns filers to remain honest about remote work deductions, vehicle expenses, or utilities, yet 3% of millennials risk dishonesty to save a buck or two. This is compared to 2% of Gen X-ers and 1% of baby boomers who admit to stretching the truth.
Next: A not-so-charitable action
5. Overstating the value of donated items and/or cash
Millennials tend to be a charitable bunch, but they’re not as charitable as their tax returns let on. Neither are Gen Xers or baby boomers. Five percent of all generations confessed to overstating items and cash donations on their returns to save money.
Most will report items in higher quality or inflate what the IRS would consider the fair-market value to boost their deduction. While this is one of the more common illegal tax strategies among Americans, it’s nowhere near the most popular millennial evasion technique.
4. Claiming deductions they don’t qualify for
When asked whether they’ve claimed deductions they don’t truly qualify for, all respondents said yes. It takes guts to include tax credits to which you are not entitled or exaggerate ones to which you are, but 3% of millennial filers do it anyway. This could be deductions such as the electric-drive motor vehicle credit, child tax credit, or the earned income credit.
Next: Millennials have a beef with the healthcare industry
3. Overstating deductible medical expenses
Unexpected bills can really put a-hurtin’ on your wallet — especially for retirees. President Trump’s new tax plan allows all taxpayers to deduct medical expenses that exceed 7.5% of your taxable income. However, data shows millennials are more likely to inflate medical expenses than both boomers and Gen X-ers.
Could tight budgets and money woes be the reason more young adults are willing to stretch the truth on their taxes? Maybe. A 2016 TransUnion healthcare report found 74% of millennial patients failed to pay medical bills in full, compared to just 60% of baby boomers.
Next: Do you know any hourly workers who commit this illegal tax strategy?
2. Excluding tips or income received “under the table”
Filers are subject to hefty penalties if they fail to report income on their tax returns. So are the companies who attempt to skirt employment taxes. Willful failure to include the tips you made as a waitress or the side hustle income you earned throughout the year could lead to jail time, yet a high number of millennials are willing to risk it.
In fact, NerdWallet says it’s the most common illegal tax strategy used by all three generations. About 8% of millennials and Gen X-ers have committed this potentially criminal offense, while 6% of boomers have done the same.
Next: This illegal trick is most common with the millennial generation
1. Failing to report gambling winnings
More millennials “forget” to include gambling winnings on their tax return over anything else. Apparently, young people want to forgo the necessary tax on money and prizes won via gambling.
This is a bit of a surprise, considering casinos are struggling to attract young people to slot machines and even fewer millennials report playing the lottery. But when it comes to gambling and/or winning money in fantasy football, for example? They’re all in. Seven percent of the millennial generation admits to excluding gambling winnings from their return, compared to just 4% of boomers and Gen X-ers.
Next: America fears this the most
Americans worry most about getting audited
No wonder Americans endure such a high level of stress during tax season. Trying to cheat the system for a few extra bucks on your tax return is bound to put a pit in your stomach.
Maybe it’s the result of a guilty conscience, but NerdWallet found almost 1 in 4 Americans of all ages believe an IRS audit is likely in the near future. On the flip side, 39% of young people think a personal audit is not at all possible, hence the illegal liberties. Isn’t it just like the typical millennial to think they’re untouchable?
Next: Just in case you were thinking about lying on your tax return…
What happens if you falsify tax information
For one, you could be audited. There’s less than a 1% chance the average American gets audited, but should your return throw up a few red flags, that number will increase. The penalty for falsifying information? A paltry fine of up to $250,000.
Not only could a serious offense lead to jail time, it could also cause widespread issues for you and your family down the line. Tax consultant Joshua Zimmerman tells Credit.com, “If you under-report your income, it might hurt you when you try to buy a house or apply for a personal loan. You might not get it if it looks like you cannot afford to pay it back, so lying on your taxes may hurt in that respect.”
Follow Lauren on Twitter @la_hamer.
Check out The Cheat Sheet on Facebook!